The impact investor supports chronically underfunded charities and aims to be the second biggest funder of the nonprofit sector after the Paul Ramsay Foundation.
Future Generation Global Company’s unique funding model is helping the Butterfly Foundation offer an important program to prevent young people developing severe eating disorders.
The Butterfly Foundation is launching Australia’s first outpatient program for young people with early signs of eating disorders.
“If an Australian went and undertook that program in LA, the fees are astronomically high, way out of reach of an ordinary Australian family,” says Walsh. “When I heard about that I thought, ‘Why can’t we be the initial funder of doing something like that’.”
FGG and FGX both have the dual mandate of providing investors with great returns and helping support underfunded charities. FGG provides shareholders with diversified exposure to selected global fund managers and supports Australian charities dealing with mental health. FGX gives investors access to Australian fund managers and supports Australian charities focused on children at risk.
“Because we’ve got this charitable focus, it does set us apart from other listed investment companies,” says Walsh. “This year we are donated $3 million to FGG charities and $3.8 million to the FGX charities.”
FGG supports eight charities, including The Butterfly Foundation, which is using the $293,000 it received to run the Intensive Outpatient Program for Young People. The 10-week therapeutic group program offers a new approach to helping 14 to 24-year-olds with early signs and symptoms of an eating disorder or disordered eating.
“Over the next 12 months, we will be supporting the roll out of three of these new programs in Sydney,” Walsh says.
HOW THE MODEL WORKS
One of Walsh’s challenges as CEO is explaining to potential investors how the Future Generation model works.
She says veteran fund manager Geoff Wilson set up FGX in 2014, after learning about the Battle Against Cancer Investment Trust while on holiday in the UK. He came back to Australia and convinced a group of fund managers to do a similar thing: waive their 1.3 per cent management fee and 16 per cent performance fee, allowing FGX to donate 1 per cent of its assets to charity each year.
“Based on the success of that, investors said to Geoff, ‘Would you do a global equivalent because I’m underweight, I don’t have a lot of global shares’,” Walsh says. “That is why the second company, FGG, was set up 12 months later. That was listed on the stock exchange in September 2015.”
Walsh says she chose mental health as the focus for FGG because she knew from her time as CEO of Philanthropy Australia that this “cause area” was chronically underfunded. “Most people know someone who either suffers from anxiety or depression or has an eating disorder. It is around us and I felt that the fund managers would think the cause area was a good fit,” she says.
Fifteen nonprofits submitted five-year proposals to FGG and eight were chosen, including Beyond Blue, headspace and Butterfly Foundation. FGX supports 14 nonprofits that have a focus on kids at risk.
Walsh says an example of FGX’s impact is the funding of scholarships for seven indigenous students from remote regions to attend various private boarding schools around Australia. “The organisation is called the Australian Education Indigenous Foundation, and why we love it is they have about 500 alumni who have gone through boarding school programs and the organisation is very good at tracking them,” Walsh says. “It is great if they complete the HSC or equivalent in other states, but we want to know are they going on to university, are they being trained in a trade or where are they going?”
Walsh says FGG and FGX are essentially examples of impact investing.
“Each of nonprofits that were chosen has had to help us develop a social-impact evaluation framework. And there are some very demanding targets, and deliverables that they’ve had to meet,” she says.
Walsh says the beauty of the FGG and FGX model is that shareholders vote to decide what donations each of the charities receive. She says around 50 per cent of the shareholders in both companies are retirees self-managing their super funds, 30 per cent are ultra-high net worth wealthy Australians and 20 per cent are mum-and-dad investors.
“So they are people like my mother; she has actually bought shares for each of her grandkids because she wants to teach them about getting an investment return, about capitalism and investing and getting a dividend, but she also wants to teach them about the social return, the fact that 1 per cent is donated each year to charity, and that you can get those two different types of return in the one investment, which is quite unusual.”
Walsh says the Future Generation companies plan to grow from $700 million assets today to $3 billion combined in a decade.
“Which will mean we are donating at least $300 million to the nonprofit sector across the two companies in 10 years’ time. We want to be the second biggest funder of the nonprofit sector after the Paul Ramsay Foundation.”
The aim is to fund organisations such as the Butterfly Foundation for more than the usual one to five years. “If they can measure the impact, and demonstrate measurable outcomes of what they are achieving we would like to fund it long term,” Walsh says.
Walsh says the major challenge for FGG is that the unhedged investments are at the “beck and call of what happens with the Australian dollar” but the focus on the charities adds a “fantastic dimension” to her job.
“I was originally heading to New York. I wanted to run a big philanthropic foundation in the US and Geoff convinced me to stay on and do this.” she say. “I’ve never regretted it.”